First of all, thanks to the originator and the frequent contributors of this forum. No matter what we are looking here, just getting the feeling of genuineness is highly appreciable.
I am not new to trading because I have been a trader/quant for many years but more on the sell side, in the investment banking sector. Now that I am trying to do something on my own, I found that day trade, is a completely different game play . I have had my disappointments since the last year, made many mistakes, thought that my experience on the sell side would be my edge but that didn't help me a lot. I have made some money, lost a big chunk too, hired people who 'knew' how to day trade, and finally found out that these people don't trade well. I hired people from prop shops to help me to create an innovative trading desk but I realised that in these shops, the big ones, are paid on rebates which they get from Exchanges by bringing liquidity and volume. So these people didn't learn how to trade, they were just mouse clickers. But I learned a lot about the futures markets, even if that costed me a lot of money.
I decided with an ex colleague to try to come up with a semi automatic trading system and I would like to know what your views ( especially bad ones) you may have on it and on my strategy. May be some of you have tried that before.
The philosophy of the trading system will be 100% technical which starts to trade 2 hours before US opens. The ES market will be the candidate market for the system. I want to make the system portable in order to diversify exposure if ever the system is producing presentable results. The system will be semi automatic, in that, entry points will be given by the system, exit points too, but the booking will be done manually. Exits might be discretionary if ever there is something unexpected. I want to keep this human touch because I think at my small level, completely automatic trading will make no sense bearing in mind that the trade off of a completely automatic/semi automatic is too much against the individual trader( slippage, overtrading etc).
The idea behind the system will be a top down approach. In that, I try to identify a market context on a higher time frame ( 30 minutes) in order to get a directional bias at least for my first hours of trading. I monitor mostly the trends of the RSI, CCI and check the ADX to see for what kind of price movement we are in. I also look at the major MAs, price above or below. Volume is also analysed. I also check on the skewness a bit, a bit of statistical analysis, but not a lot. Just to have an idea how statistically movements are significant.
After this analysis, normally a direction will be preferred. Then I will reduce the the time frame to 5 minutes in order to place my trade. The entry point will be based on notions like value area, volume stops, better volume, volatility, ADX slope. If those setups are respected, I try to see if this price environment is/was close to overbuy/sold zone, if the CCI is/was a little bit ago in an extreme zone, and if the most of the setups are respected, I am giving some king of weight to each setup, I will enter a trade. Normally I will stay in the trade if there is a crossover is happening and/or the supertrend becomes in the colour of my direction. If those changes already happened, I will enter and will monitor the exit through the Pivots, CCI divergence and VSA techniques.
The idea behind the system is based on the fact that trend or a move formation, for most of the time, respect the same rules, be it in terms of price action, volume behaviour, divergences. Of course there might be external shocks making the moves behave differently. Thats why, I would like to believe if I can incorporate all these concepts in a validation system and see if the price, volume, level components are checked, my entries and exits will be improved. Overtrading will be minimised and the belief in each trade will be maximised.
I am just at the very beginning so what I am writing now might …